tv Nightly Business Report PBS February 24, 2010 6:30pm-7:00pm EST
captioning sponsored by wpbt >> susie: the fed chairman tells wall street exactly what it wanted to hear. >> economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations are likely to warrant exceptionally low levels of the federal funds rate for an extended period. >> tom: but ben bernanke tells lawmakers he's moving ahead with plans to pull some of the rescue programs put in place during the financial crisis. you're watching "nightly business report" for wednesday, february 24. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program was made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. your interest rates won't be going up for a little while longer. federal reserve chairman ben bernanke told congress today he does not plan to raise rates anytime soon. >> tom: susie, those were magical words for investors. stocks rallied with the dow gaining 91 points. >> susie: tom, bernanke also told lawmakers about the fed's plans to wind down the emergency lending programs put in place during the financial crisis. darren gersh has details, and how the transition back to normal could impact you.
>> reporter: when you've pumped more than a trillion dollars into the financial system, as the federal reserve has over the course of the recession, taking that money out again is not an easy task. which is what fed chairman ben bernanke was trying to explain to congress today. >> at some point we want to return to a more normal stance, and finding a way out that is credible and understandable and clear is very important for confidence. >> reporter: it is clearly a communications challenge. last week the fed bumped up the interest rate on a stand- by lending program used for banks called the discount rate. today congresswoman maxine waters worried even this somewhat technical rate adjustment could raise costs for banks and lead to higher borrowing costs for businesses and homeowners. >> i don't want to see these interest rates increase on these adjustable rate mortgages. >> there is no linkage between adjustable rate mortgages and the discount rate. it's linked to the federal funds rate, which we have said we anticipate will be at an unusually low level for an
extended period. the federal funds rate is the fed's key short term interest rate and an important benchmark for the economy. economist richard dekaser says bernanke's promise to keep that rate low for an extended period was just what many in the financial world wanted to hear. >> i think markets got a little spooked last week. they did raise a relatively obscure interest rate. many took this as a sign of the fed changing course and perhaps moving aggressively and i think he beat back those expectations pretty well. >> reporter: but expectations on capitol hill are another matter. member after member asked bernanke about ways to restart lending and hiring in their districts. and dekaser says it isn't hard to read between those lines. >> they don't want to seem too supportive of the fed reducing its accommodation-- support for economic growth-- anytime soon. so if only for appearances sake, i think we are going to see congress members broadly resisting any effort by the fed to reverse course. >> reporter: bernanke plans
another move back to normal as soon as next month when it ends special programs that have supported lending to banks and consumers. the fed is also planning to wind down purchases of mortgage backed securities by the end of march, a move that could lead to somewhat higher mortgage rates. darren gersh, "nightly business report", washington. >> tom: here are the stories in tonight's "n.b.r. newswheel:. wall street rallies on ben bernanke's pledge to keep rates low for a long time. the dow up almost 92 points, the nasdaq added 22, and the s&p 500 rose 10.5. but investors ignored an 11% drop in new home sales last month; we'll have more on that and home builder stocks in tonight's "market focus". a $15 billion job creation bill passed in the senate today thanks to bipartisan support. 15 republicans signed on to majority leader harry reid's plan giving new tax breaks to companies that hire the unemployed. the measure now heads to the house. in greece, a general strike crippling the capitol.
50,000 people marched through athens protesting that nation's plans to fix its debt crisis. also, standard and poor's said it could cut greece's debt rating to near junk status within a month. >> susie: many apologies to consumers-- in english and japanese-- from the c.e.o. of toyota today. akio toyoda, the 53-year-old grandson of toyota's founder, answered pointed questions from lawmakers on capitol hill about safety issues in the company's vehicles. with the help of a translator, toyoda described plans to repair vehicles and restore customer trust. stephanie dhue reports. >> reporter: before a crush of cameras, akio toyoda took responsibility for the safety of the cars that bear his name. >> we never run away from our problems or pretend we don't notice them. >> reporter: and he admitted toyota got away from its priorities of safety first, quality second, and volume third. >> toyota has, for the past few years, been expanding its business rapidly, quite
frankly. i fear the pace at which we have grown may have been too quick. >> reporter: answering questions through a translator, toyoda said the company has not been able to find a problem with its electronic throttle control system. he says the company has tried to recreate the accidents to find the problem. >> ( translated ): and up until yesterday, those reduplication tests have been repeated and conducted; however no malfunction or problem has been identified based upon the test conducted internally within toyota. >> reporter: pressed by lawmakers earlier in the day, department of transportation secretary ray lahood said recalled toyotas that have not been repaired are not safe. >> we've determined they are not safe. >> reporter: there is doubt the repairs to floor mats and sticky pedals will totally address the sudden acceleration problems. lahood says the national transportation highway safety administration is continuing to investigate. >> we believe we need to look
at the electronics in these cars, because people have told us they believe it is an issue, and we're going do that. we're going to have a complete review on the electronics, but for now, any car that's on the web site needs to go back to the dealer to be fixed. >> reporter: toyota says it is cooperating with the investigations. lawmakers took swipes at toyota executives. florida republican john mica, referring to a memo that boasted $100 million in savings by limiting the floor mat recall: >> this is one of the most embarrassing documents i've ever seen. in your preparation of this, you embarrassed all of those people i represent across this country, this is absolutely appalling. >> reporter: toyota north american president yoshimi inaba says the memo was prepared for him and he doesn't remember seeing it. pennsylvania democrat paul kanjorski scolded the c.e.o. and the company's handling of safety issues.
>> you will be called upon under our system to pay compensation for that. >> reporter: with several investigations and dozens of lawsuits, toyota is under intense scrutiny. and the attention from capitol hill continues next week, when the senate commerce committee delves into toyota's recalls. stephanie dhue, "nightly business report", washington. >> susie: meantime, toyota owners will be in the driver's seat when it comes to the recall and customer service. toyota will offer free at-home pickups of recalled vehicles. the automaker will also pay for out-of-pocket transportation costs and offer drivers free rental cars during repairs. it began as an agreement between toyota and new york attorney general andrew cuomo. but, during today's hearing on capitol hill, a toyota executive said the offer will be extended to toyota customers nationwide. >> tom: still ahead on the program, tonight's "street critique" guest is questioning the future of the recovery. michael farr wonders what
>> tom: consumer-oriented stocks and the financial sector made the best gains today on the heels of ben bernanke's reassurance to keep interest rates low. let's take a look at an exchange traded fund focused on consumer discretionary stocks like mcdonalds, disney, and comcast; the e.t.f. is within a dime of a new 52-week high. it may be noteworthy to remember that just yesterday, the latest consumer confidence figures for february took a surprising dive. within the sector, there was one big stand out, and one big drop. carnival stock jumped more than 6% on almost four times volume. what may be good news for shareholders could cost cruise ship passengers. thanks to what the company calls unprecedented travel bookings, carnival will hike summer cruise prices as much as 5%. it's worth looking at competitor royal caribbean, which also touted encouraging bookings last month. shares up 7% on three times average volume today. maybe people are looking to get away after tax day, but that's not helping h&r block. the stock tonight is at its lowest price since early
december. its tax prep business is falling short. bank of america and j.p. morgan led the way higher for the dow as bank stocks saw buyers. the c.m.e. group led the broader financial group higher. the exchange reported its busiest bond trading day in 18 months on tuesday, driven by quarterly technical factors but also trading has increased since the fed raised its discount rate last week. speaking of trading, there will be some new rules this spring for stock short sellers. the securities and exchange commission okayed new restrictions for those wanting to bet on a stock going down in price. if a stock is down more than 10% in a day, the so-called uptick rule will be triggered. that means someone can short a stock only if the price is above the current price. that will be the rule for that session, and the following session. it's similar to the old uptick rule, but it only applies
after a 10% price drop. how about a big upside move? it was fueled today by a buyout. printing company bowne and it's offering $11.50 a share, so the stock still has a little discount in it with tonight's close at $11.15 a share. not many people were buying new homes in january. sales dropped more than 11% to a record low. between that and earnings, homebuilders were off. toll brothers called the market choppy as its first quarter loss narrowed. its cancellation rate also dropped. but the stock turned down none the less. pulte homes and d.r. horton also were lower. a handful of retailers out with results and outlooks, led by a couple of discount retailers. t.j.x. is the company behind t.j. maxx and marshalls. fourth quarter profits jumping 58% with revenues and margins both growing. its outlook is slightly better
than the median consensus. t.j.x. shares at a new 52-week high, up more than 3%. fellow discounter dollar tree also at a 52-week high. the story is similar; growing margins and profits and a better than expected earnings forecast. and jeweler zales ended six straight quarters of losses. the company says it continues to look for ways to raise capital. a huge volume pop for s.t.e.c., that's a computer memory maker. the stock lost almost a quarter of its value on eight times average volume after a big earnings warning due to its biggest customer having plenty of inventory. in addition to day two of ben bernanke's testimony about the economy, the white house is holding a health care summit we mentioned some of the hospital stocks last night. some health insurers may be in focus as well. these publicly traded insurers are being asked to come to washington next week by health and human services secretary the focus will be on their insurance premium increases. well point recently hiked individual rates in california by as much as 39%.
and that's tonight's "market focus". >> susie: some good news for investors about dividends today. altria and chubb said they are raising their dividends; the latest in a slew of companies to do so. but that's not just good news for investors in those stocks. as erika miller explains, rising dividends may be a vote of confidence in the economic recovery. >> reporter: there are five new celebrities getting a red carpet welcome. but you won't see these stars on the silver screen, only a stock screen. marriott hotels, carnival cruise lines, broadcom, tellabs, and time warner are the five companies that started paying dividends this year. though the group may be small, s&p analyst howard silverblatt says the message is big. >> the fact that a few are coming into the market and saying, yes, i am willing to pay and start a new policy-- as compared to cutting it or increasing it-- is a very positive sign. >> reporter: that's not all. since the start of the year, 60 companies have raised their dividends. that compares to 47 this time
last year. although both years are well below 2008. equity strategist jeremy zirin has noticed a lot more industrial and technology companies making the move. >> that's a very good sign that the companies that are more sensitive to the broad economic outlook are starting to increase their dividend, showing... signaling increased confidence in the economic outlook. >> reporter: many on wall street think this is just the beginning. they are predicting a big wave of dividend hikes in the second half of the year. >> companies need to see that their products, their earnings, their cash flow is going well. not just the general economy, but their specific product. and they're going to need a couple of quarters under their belt before they'll commit cash. >> reporter: if you think dividends matter only to fixed income investors, you're wrong. according to s&p, since 1926, dividends have been responsible for 40% of the stock market's total return. in fact, without dividends, the stock market's gains would have barely topped inflation. and though dividend-paying stocks are not without risk,
many investment strategists think these days they're a better option than bonds. >> dividend income right now is interesting because interest rates are so low. when short term treasuries or c.d.s are yielding paltry amounts, you get a nice 2%, 2.5% dividend from the s&p 500 currently. >> reporter: so, while dividends may not get the same attention as a hollywood star, they could play a nice supporting role in your portfolio. erika miller, "nightly business report", new york.
>> tom: tonight's street critique guess says it's not clear the u.s. economy has a green light to grow without uncle sam's help. he's michael farr, author of "a million is not enough." michael, welcome back to n. b. r.. what did you make of the chairman's comments today, ben bernanke, on capitol hill and his outlook for the economy in 2010? >> well, i kind of heard what i expected to hear from the chairman today, which is kind of odd at times. you know, he said that we're going to keep rates at this low level for a long period because the economic recovery is not self sustaining. so what he basically said is what we've been saying to you for quite a while. we're seeing a reinflation of the economy and the stock markets as a result of a lot of government cash. and the chairman today confirmed that without a whole lot of that government cash, we would be drifting lower and we wouldn't have the recovery that we have. so we're still looking for end consumer demand to take over and we think it's still a way
off. >> tom: so steady is the course, you still like blue chips, still like quality. how do you define quult in this market? >> transparency is high on the list of quality. you need strong balance sheets, you need really clean cash flow, low debt to equity ratios and you need some experienced management. so those things, i think, are important for quality. and i think also, the more speculative areas in the markets right now are to be eschewed. >> tom: does that mean stay off any growth sectors? >> no, i think there's plenty of growth available with balance sheets and with numbers, we manage those sorts of choice. we have the larger companies in our portfolios, and the fun where we're the sole manager, we own those sorts of companies specifically. >> tom: let's take a look at the top ten stocks that you brought with you, back in december on n. b. r., this is the performance that has
happened year to date with that portfolio of ten stocks. so far beating the s&p 500. to what do you attribute that success? >> probably luck at this point. you know, two months is an awfully short period. this is a portfolio that we do for you really for your program. i own this, by the way, and i buy it in the beginning of every year and i sell it at the end of every year. these are companies that are big blue chippy companies and the markets have been gut for the first two months of the year. and these have held up better, i think they will throughout the year. >> tom: the full list is on our website. the leader and the lag ard on the list here, the leader is patterson company, a dental supply firm. do you still like the stock here two months in? >> i like it very much, i really do. and it's a similar story really the leader and the lag ard, paterson dental used to trade at a really high multiple, they returned to more normal growth. the pendulum of the market took them we believe to a
discounted level. we think they're cheap at 16 times earnings. >> tom: we've got 20 seconds left in the lag ard, that is del off by 6% this year. do you still like it at these prices in the low teens? >> i really do, i think there's a lot of up side here. most people hate it. at a very will multiple. i think they're a great prospect, they vunl just been able to execute. >> tom: any disclosures? >> own them all, i own them personally, the firm owns them and also the touch stone capital appreciation fund which we manage. >> tom: our guest this evening, michael farr, author of "a million is not enough." >> thanks, tom. >> susie: here's what we're watching for tomorrow. quarterly results from gap, hyatt hotels, kohls, and live nation. january durable goods and weekly jobless claims are reported as well. also tomorrow, president obama hosts a bipartisan summit on health care reform. he hopes to unite all parties to agree on how to revamp the
u.s. health care system. >> susie: if you've ever put your video onto the web, a court ruling in italy could affect you. three google executives were convicted of violating that nation's privacy laws. prosecutors say video of an autistic boy being bullied by classmates was left on a google video sharing site for two months, violating the boy's privacy. but google says it shouldn't be liable for videos posted on its site. the executives were tried and convicted in absentia. google plans to appeal the ruling. >> tom: it was on the rocks. now general motors' deal to sell its hummer brand is officially kaput. g.m. says the chinese buyer can't complete the purchase. no details were provided on just why the deal stalled. so, instead of selling it, g.m. will start winding down the brand, readying it for history's scrap heap. still, g.m. says it'll continue to honor warranties and provide service support to current hummer owners.
>> susie: as we mentioned, new home sales fell sharply last month, a sign of continuing weakness in the housing market. if you bought a home at the height of the market a few years ago, you're probably paying a lot in property taxes. tonight's "money file" has some ways to cut that bill. here's john simons, senior
personal finance editor at black enterprise. >> the recession has been over for months now, but it still doesn't feel that way to many of us, especially if you're a homeowner. if you purchased your home after 2003, it's likely that you're paying property taxes that reflect a high, top-of- the-market home value. if that's the case, one way to reduce your financial burden is to have your home reassessed and your property taxes lowered by following these simple steps: first, find your county tax assessors web site. the vast majority of assessors currently have a link on their home page to an application homeowners can use to request that their property be reassessed due to a decline in market value. if you can't find an application online, give them a call and ask them to send you one. remember, you're trying to build a case that shows your home is worth less than the amount the county is taxing you on. typically, you'll need your assessor's parcel number, your home's current assessed value, and data from at least three
comparable homes in your area that sold recently. you can pull comparable sale information from sites like zillow.com or cyberhomes.com or ask a local agent to send you a list of comps. finally, you'll need an estimate of your homes value from a licensed appraiser. submit the application. then wait. if your property tax bill comes due in the meantime, pay it. if your home is reassessed retroactively, the assessor will cut you a refund check. enjoy your savings. i'm john simons. >> tom: that's "nightly business report" for wednesday, february 24. i'm tom hudson, goodnight everyone, and goodnight to you too, susie. >> susie: good night, tom. i'm susie gharib. thanks for watching, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: